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Hungarian Gov’t Aims to Create Baby Boom with Generous Financial Help

Gábor Sarnyai 2019.02.13.

The Fidesz government has always been generous with families, but its current policies will raise the world’s highest GDP-ratio dedicated to family support even higher. Unconfirmed until now, Fidesz will soon begin instituting progressive solutions.

The Hungarian population has been continuously decreasing for three decades. The demographic decline has been of utmost importance to Hungarians since the Harderian prophecy proclaimed they would disappear and melt into surrounding nations.

Previous Hungarian systems suffered famous demographical issues. During the Austro-Hungarian times and the Horthy-era, public discourse focused on the only child model of middle-sized Hungarian farm families. The public considered the issue the main cause of “national death.” Later, the Socialist regime introduced a draconian policy aimed at increasing fertility rates. In the ’50s, Hungary banned abortion and taxed individuals without children. Referred to as the Ratkó-era, these years led to a baby boom in the country.

The Prime Minister wants to see more children

The new measures were announced by Viktor Orbán, who himself has five children. The announcement came as no surprise as the government has been spending a lot on families. It considers itself a Christian-conservative political power and identifies traditional families as its voting base. After the election, Orbán announced one of the main goals of the new parliamentary cycle: increased fertility rates.

Inside Hungary’s Family Support System

The Fidesz-government declared war on low fertility rates nine years ago. Meanwhile, the government has continuously increased funds devoted to family benefits. The 2019 budget allocates 2000 billion forints (1 billion HUF is 3.2 million euros) to family policy goals—twice as much as in 2010.

It is rare to find a government that takes its family policy as seriously as the Hungarian state: five percent of the GDP is dedicated to it, the OECD average is around 2,5 percent.

According to the new family protection plan:

  • Every woman under 40 years of age will be eligible for a preferential loan when they first get married.
  • The preferential loan of the family home purchase scheme (CSOK) will be extended; families raising two or more children will now also be able to use it to purchase resale homes. The earlier regulation only covered newly built houses.
  • The government will repay 1 million forints of the mortgage loans of families with two or more children. This measure was first announced in August 2017 for families with three or more children, with the government paying off 1 million forints of the families’ mortgages for every third and subsequent child from January 2018. The measures have now been extended to include families raising two children.
  • Women who have had and raised at least four children will be exempt from personal income tax payment for the rest of their lives.
  • The government will launch a car purchase subsidy programmed for large families. Families raising at least three children will be eligible for a grant of 2.5 million forints to buy a new car seating at least seven people.
  • The government will create 21,000 creche places over three years.
  • Grandparents will also be eligible for a child-care fee if they look after young children.

As a result of these new policies, some families can expect their income to increase exponentially. According to some estimates, a family could purchase a car and a home in the country-side if they receive all the government subsidies offered for having three children.

According to Index.hu, a woman in Hungary with four children will now be able to receive almost 55 million HUF in state support under the new measures. (This scenario is only possible if all requirements are met and every opportunity is taken; therefore, it is highly unlikely to occur.)

The government estimates the total cost of the new measures to be 150 billion forints a year. Meanwhile, economists and analysts expect the total cost to be closer to 300 billion forints a year.

What have the last eight years of policies achieved?

Last year’s final data showed that 91,577 children were born in Hungary. Between the beginning of the century and 2009, the number of newborn babies ranged from 95 to 100 thousand each year. But, between 2010 and 2013, this figure dropped below 90,000 and has been stagnating since 2014.

In post-socialist countries, fertility rates have decreased significantly since the transition; the average fertility rates were below 1.3 at the turn of the millennium. However, the numbers have begun to improve in the region—Hungary being the exception.

Although the willingness to have children has increased, the fertility rate has remained at 1.5 percent. Some experts believe the slight improvement is merely a natural result of playing catch up and is unrelated to the government’s policies. According to a study called Demográfiai Portré (Demographical Portrait), those having more children are not the group the government intended to target with its policies. The measures were meant to support middle-class families that already have enough capital to build a home. Families must receive a regular income to qualify for the subsidies and family-based tax refunds.

It will have some negative effects on the economy

Hungary’s real estate prices are already skyrocketing, and with the new announcement come even higher rental prices. According to Ingatlan.com, middle-sized flats in Budapest and larger towns in the countryside are likely to become more expensive.

Featured Image: officina.hu